Recurring payments in Europe: compliance and conversion strategies

Recurring payments are now a foundation of European commerce. From subscription streaming and SaaS to mobility passes and meal kits, customers expect seamless billing experiences that run in the background. For merchants, recurring payments drive predictable revenue and stronger customer relationships.

But recurring payments in Europe come with challenges. Regulations like PSD2, GDPR, and SEPA Direct Debit rules demand strict compliance. At the same time, conversion is threatened by failed renewals, expired cards, and abandoned subscriptions. Merchants that balance compliance and conversion strategies will succeed in building sustainable subscription revenue.

The growth of recurring payments in Europe

The subscription economy continues to expand across European markets. Consumers are signing up for services in media, retail, and financial products at higher rates every year. SaaS adoption is surging among businesses, and recurring billing models are reshaping everything from transport passes to household essentials.

Recent data shows that recurring payments already account for a large share of card transactions and direct debit activity in major markets. Consumers in Germany lean heavily on direct debit for subscriptions, while UK customers often rely on recurring card charges. This diversity underscores the need for localization.

Our report on 50 payment and merchant statistics shaping Europe in 2025 shows that merchants offering multiple payment methods at checkout, including recurring-friendly options, consistently achieve higher conversion.

Compliance requirements for recurring payments

PSD2 and Strong Customer Authentication (SCA)

Under PSD2, Strong Customer Authentication is required for most online transactions. For recurring payments, the rules differ depending on the type:

• Initial transaction: Requires SCA (e.g., biometric or two-factor authentication).
• Subsequent transactions: Often exempt, provided they are for the same amount and paid to the same merchant.
  

This creates opportunities for smoother experiences but requires merchants to implement exemptions correctly. Failing to do so risks declined payments.

GDPR and data handling

Recurring payments require storing sensitive customer data, including payment credentials. GDPR mandates strict rules on how data is collected, stored, and processed. Merchants must ensure transparency, secure consent, and allow customers to control or withdraw data at any time.

SEPA Direct Debit rules

For eurozone countries, SEPA Direct Debit remains one of the most popular recurring payment methods. Merchants must follow strict mandates on pre-notification, authorization, and refund rights. Understanding these rules is vital for reducing disputes.

AML and KYC

Platforms that facilitate recurring payments between multiple sellers and buyers may need to perform anti-money laundering and know-your-customer checks. Compliance obligations expand as platforms grow.

For deeper insights into how these frameworks overlap, see our guide on embedded payments compliance in Europe.

Conversion challenges in recurring models

Recurring payments also introduce unique conversion challenges.

• Card expirations: Many recurring charges fail because the customer’s card is expired. Without a strategy for updating card details, churn increases.
• Insufficient funds: Recurring billing dates often coincide with customer cash-flow issues. Failed renewals create lost revenue.
• SCA failures: If exemptions are not applied properly, customers may be asked to re-authenticate, leading to higher drop-off.
• Regional differences: In Germany, recurring direct debit is trusted and expected. In the UK, recurring card charges are common. In Spain, mobile-first customers are looking for wallet-based recurring payments.

Our analysis of top payment methods in Europe shows that failing to adapt recurring methods to local preferences is one of the main drivers of subscription churn.

Strategies to improve compliance and conversion

Merchants can strengthen both compliance and conversion by implementing targeted practices:

1. Smart retry logic: Use intelligent retry strategies when payments fail due to insufficient funds or temporary network issues. Spacing retries over different times of the day or billing cycles can recover revenue without frustrating customers.
   
2. Dynamic routing across acquirers: Transactions should be routed to the acquirer with the best authorization rates for that region or card type. This not only improves conversion but also reduces costs. For a deeper view of how routing shapes merchant performance, see our analysis of acquirer fee optimization in Europe.
   
3. Network tokenization: Tokenization helps merchants avoid failed transactions caused by expired cards. Tokens update automatically with new card details, ensuring continuity in subscription billing.
   
4. Localized recurring methods: Each market has its own recurring payment expectations.
   
   • Germany favors SEPA Direct Debit.
   • The UK prefers card-on-file models.
   • Southern Europe shows higher adoption of wallet-based recurring charges.
     Offering localized methods reduces churn by aligning with consumer habits.
     
5. Real-time payment rails: Emerging real-time systems like SEPA Instant open opportunities for recurring payments that settle immediately. Merchants should prepare for recurring use cases tied to instant settlement. More context can be found in our guide on real-time payments across Europe.
   

How orchestration supports recurring payments

Payment orchestration is central to managing recurring payments at scale:

• Unified compliance: Orchestration platforms integrate SCA flows, GDPR-safe data storage, and PCI DSS vaulting in one layer.
• Multi-method flexibility: Merchants can support SEPA Direct Debit, cards, wallets, and real-time options from a single integration.
• Churn reduction: Orchestration enables retry logic and failover between PSPs, protecting revenue from technical or authorization failures.
• Centralized reporting: Disputes, refunds, and regulatory audits become easier when data is consolidated.

This flexibility is why orchestration is better suited than a single PSP for recurring business models. For more, see our guide on payment orchestration vs PSP in Europe.

Roadmap for merchants

1. Map compliance obligations across each market where recurring billing is active.
   
2. Build localized checkout to support recurring-friendly payment methods in each country.
3. Adopt orchestration to unify recurring billing operations across multiple PSPs.
4. Implement retry and tokenization to reduce failures from expired cards or insufficient funds.
5. Monitor conversion data continuously and adjust routing strategies to maximize approval rates.

For more on regional patterns and subscription preferences, see our report on European retail payment trends in 2025.

FAQ

What is SCA for recurring payments in Europe?

SCA is required for the first payment in a recurring series. Subsequent charges for the same amount and merchant are usually exempt.

Can recurring payments skip authentication under PSD2?

Yes, if exemptions are applied correctly. However, merchants must configure flows to ensure compliance or risk higher decline rates.

What is the role of SEPA Direct Debit?

It is a trusted and widely used recurring method in eurozone countries, especially Germany and the Netherlands.

How can merchants reduce recurring payment failures?

Using tokenization, retry logic, and multi-acquirer routing significantly reduces failed charges and customer churn.

Does orchestration support subscription billing?

Yes. Orchestration enables merchants to integrate recurring-friendly methods, automate retries, and manage compliance across markets.

Recurring payments are essential for subscription businesses in Europe. But without the right strategy, merchants risk high failure rates and compliance gaps. Customers expect seamless renewals, regulators demand strict controls, and competition is unforgiving.

Merchants that combine compliance with conversion strategies will protect revenue and build long-term customer relationships. Payment orchestration delivers the flexibility and resilience needed to achieve both.

Contact Gr4vy to streamline recurring payments, improve conversion, and stay compliant across European markets.